EY Ford Rhodes partner calls for corporate tax reforms to improve investment climate
Haider Ali Patel on Thursday urged the government to introduce a sunset clause in Section 4C of the Income Tax Ordinance, 2001, to define a clear end date for the levy of super tax in Pakistan.
Speaking at a two-day seminar hosted by the Karachi Tax Bar Association, Patel said the super tax was disproportionately burdening sectors that were already contributing significantly to the tax system.
He noted that the super tax, imposed at rates ranging from 4% to 10%, is charged in addition to corporate tax on documented sectors and is primarily borne by transparent, audited, and listed companies.
Patel said the levy was introduced retrospectively through the Finance Act 2022 and largely affected the documented corporate sector. Although the Federal Constitutional Court upheld the tax, including its retrospective application, as legally valid, he argued that “legal validity does not equal economic wisdom.”
According to Patel, the super tax discourages investment by penalizing companies that create jobs, pay taxes, and maintain financial transparency.
He warned that foreign investors remain cautious while domestic businesses hesitate to expand due to uncertainty surrounding additional taxation.
Patel recommended that the government reassess the super tax based on affordability and its impact on Pakistan’s investment climate rather than focusing solely on its legal status.
Among other proposals, he suggested reducing the corporate tax rate to 25% to improve competitiveness with regional economies and remove disincentives for businesses to incorporate formally.
He also advocated phasing out parallel taxation regimes by merging Section 113, Alternate Corporate Tax (ACT), and withholding tax-based minimum tax into a single transparent minimum tax system with low rates and carry-forward provisions.
Patel further proposed targeted tax incentives for listed companies to encourage transparency and attract large private businesses to the capital market.
Tax experts at the seminar said reforms aimed at simplifying the tax structure and lowering the burden on compliant sectors could help improve investor confidence and support economic growth.